My husband is 55 and is retiring this year. I have read that you need 70-80% of your present income to retire. For the last 8 years we have put 2 sons through college so we have not had our full salary to spend. Should we subtract that amount from our present salary and then take 70% of that amount to figure our income. I have known several couples who have retired and say that figure of 70-80% is too high. Who do we believe?

<<My husband is 55 and is retiring this year. I have read that you need 70-80% of your present income to retire. For the last 8 years we have put 2 sons through college so we have not had our full salary to spend. Should we subtract that amount from our present salary and then take 70% of that amount to figure our income. I have known several couples who have retired and say that figure of 70-80% is too high. Who do we believe?>>

You believe yourself because only you and your husband know for sure what you will need to support your desired lifestyle in retirement. The percentage figures you see bandied about are only rules of thumb and guidelines. Consider them as such for rough planning purposes.

My desire is to have at least as much NET income as I have today. In that sense, I need 100% of what I have now for spending purposes. I start by looking at gross income today. From that, I subtract all taxes and savings. That gives me what I'm living on, so that becomes my desired net income level in retirement. Note: I subtract savings from today's gross because in theory I won't save after retirement. Instead, I'll begin to spend what I've saved up to that point.

O.k., so now I've got a hypothetical income. I now look at my sources such as Social Security, company pension and savings withdrawals. I estimate federal and State tax impacts on all three. Based on those impacts, I back into my gross income. My Social Security and company pension will be "fixed, " so whatever extra I need to make up any shortfall and to pay taxes must come from savings. Now that I "know" the latter number, I get a better idea of how it can/should be invested and how long it can last. It also tells me if I need to adjust my savings plan before I retire.

I don't know if such an approach will work for you, but it does for me.

Pixy is correct. Don't know why 70% of EArnings is stated so often versus 70%, 80% or 100% of expenses. Clearly everyone is not living up to full current income and the savings component can be large. Take a long look at fixed expenses; variable expenses that you could cut back on in emergency; don't forget special annual expense like Christmas, that can inflate a monthly estimate. Remember too that travelling and leisure expense can go up in retirement.

In short, the 70-80% rule of thumb holds up pretty well. The stats are compiled through an ongoing study called the RETIRE Project from Georgia State University in Atlanta. The following pre-retirement/post retirement income illustrations were given:

pre-retirement post-retirement percentage

$30,000 $23,158 77%$60,000 $40,390 67%$90,000 $64,066 71%

The article also looks at location, one of the biggest factors in post-retirement spending. Retirees capable of moving to less costly areas of the country enjoy an advantage (as if you didn't know that already).